A. Field of the Invention
The present invention is directed to the field of marketing of products and services and specifically to the automated control of the pricing of products and services.
B. Background
Effective pricing of products that are made available for sale is often a complicated task. In order to maximize profits, not only must revenue be optimized, but also the costs of inventory must be taken into account. One strategy used is to periodically reduce the price of the products or services, effecting a markdown, in order to encourage sales of the products or services. The amount of the markdown is often set by a sales agent who has had experience in the market for the products or services and can, using his or her experience and intuition determine the timing and amount of markdowns.
In particular, the sale of seasonal products poses a high financial risk for merchants. This risk is even more acute in the retail business. Each seasonal article can be assigned a specific sales period. When high-fashion and fashion articles are involved, the merchant wants to have as little remaining stock as possible at the end of the sales period, as it will be difficult to sell this merchandise even with markdowns. In this case, larger remaining stocks translate to higher losses. In addition to fashion articles, such as pink raincoats, this also applies to other products, such as computer hardware.
For less “fashionable” products, the risk is lower because merchants can store any remaining stock and then try to sell it at the normal price again in the same season of the next year. Because storing inventories is expensive, however, merchants will generally prefer to sell their merchandise by the end of the regular sales period.
Merchants use markdowns to ensure that the merchandise is sold out as completely as possible by the end of a season. Markdowns are price reductions or buyer's incentives aimed at promoting the sale of certain articles. Of course, markdowns reduce the gross margin, which means the revenue merchants earn for selling the merchandise is less than originally planned. Merchants usually plan a certain budget for markdowns that must not be exceeded. Accordingly, markdowns are applied restrictively in retail, which once again increases the risk of remaining stocks at the end of the season.
As discussed above, effective pricing of products is a complicated task which is often performed manually. For example, price adjustments in planning decisions may be used using manual selection systems. Further, a sales promotion may also be implemented in a manual or automated process. A promotion refers to a special event, retail sale, or other activity designed to reduce inventory. For example, spring sales events, two-for-one promotions, end-of-the-season sales, clearance sales, etc. are examples of retail promotions which are utilized to reduce inventory. Sales promotions are different than a markdown controlling process which is not necessarily tied to an event or special circumstance.
Heretofore, a system for providing automated control of pricing of products and services has not been available. Specifically, in existing systems, one or more aspects of the pricing of products and services over the course of a season must be addressed manually. This is often tedious and time consuming and can lead to less than optimal pricing. There is a need for a single system that automatically controls the pricing of good and services that takes into account actual sales information, expected sales, historical sales data and other factors in order to automatically set and adjust pricing to achieve sales goals more effectively.